Monday, February 29, 2016

A Real Good Reason To Not Vote A Businessman Into The White House

Many Americans (okay, mostly white Americans who vote Republican) say we need a President who
will run the country like a business -
I think this is because most of them don't understand how the economy really works.

I recently read an article, "Masters of the Universe but Slaves
of the Market: Bankers and the Great Financial Meltdown" by Stephen
Bell and Andrew Hindmoor, in the British Journal of Politics and International Relations, and I think I'm finally beginning to wrap my
mind around how starting in the 1980s, the privileging of the financial
sector over the real economy almost collapsed global capitalism if it
hadn't been for government intervention to save Capitalists from themselves.

Capitalists unleashed is dangerous for America!

One of the most popular explanations of the banking crises of 2007-08 (you would have heard this one a lot if you watched Fox News during the crisis), was due to imprudent mortgage lending to black and brown people because of the Community Reinvestment Act of 1977 which encouraged banks and other lending institutions to meet the credit needs of communities they operate in.

But, according to Bell and Hindmoor, banks and financiers (with the cooperation of political elites in both the Democratic
and Republican Party) created the greatest financial crisis in the
history of capitalism all because they pushed for and got the
liberalization and deregulation of financial markets they wanted under the wide-spread, but
false assumption, that markets are self-regulating and that banks that
make poor decisions would be disciplined by the market.

What they didn't count on was how competitive market pressures and the
insatiable pursuit of profit opportunities by bankers and financiers would create the kind of systemic
risk that could topple the entire global financial system (specifically, in order to
get ever-higher return-on-equity, they engaged in highly risky
leveraged-trading activities and created exotic/complex financial
instruments that neither they nor the so-called regulators fully
understood).

By the time
the sub-prime mortgage security market collapsed (IMF estimates the
declared loses to be $500 billion) in 2008, panic set in about the value
of other securitized assets (which tended to have AAA bond ratings due
to a rigged bond rating system) because they really didn't understand
what they had created, could not control what was happening as the
crises unfolded, and simply wanted out before they went insolvent due to the loss of value of securitized assets on their balance sheets and low
capital buffers due to so much leveraging.

They got the neo-liberal system they wanted, but rather than become "Maters of the Universe, they became slaves of the market they created.

So, yeah, let's put Trump in control and deregulate the economy and unleash
privatization and marketization even more and see where that will land
us.